SCI Engineered Materials, Inc 10-Q for FY2024 Q2

SCI Engineered Materials, Inc. (SCIA)

10-Q 2024-08-02 For: 2024-06-30

Added on April 11, 2026

About this 10-Q

SCI Engineered Materials, Inc filed this 10-Q on August 2, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $5.53M; down 25.8% from $7.46M a year earlier
Net income: $526.51K; up 3.0% from net income of $511.36K a year earlier
Diluted EPS: $0.12; up 9.1% from $0.11 a year earlier

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Ohio	31-1210318
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, without par value	SCIA	OTCQB


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒	Emerging growth company ☐


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	3

	Statements of Income for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	5

	Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	6

	Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	7

	Notes to Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	N/A

Item 4.	Controls and Procedures	18

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	N/A

Item 1A.	Risk Factors	N/A

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	N/A

Item 3.	Defaults Upon Senior Securities	N/A

Item 4.	Mine Safety Disclosures	N/A

Item 5.	Other Information	N/A

Item 6.	Exhibits	19

Signatures		20


	June 30,		December 31,
	2024		2023
	(UNAUDITED)
Current Assets
Cash and cash equivalents	$	6,192,476	$	5,673,994
Investments - marketable securities, short term		509,478		1,000,000
Accounts receivable
Trade, less allowance for doubtful accounts of $15,000		1,178,069		854,501
Tax - Employee Retention Credit		40,539		40,539
Other		23,217		15,607
Inventories, net		2,456,169		4,654,398
Prepaid purchase orders		5,408		1,123,980
Prepaid expenses		132,613		214,458
Total current assets		10,537,969		13,577,477

Property and Equipment, at cost
Machinery and equipment		8,785,088		8,677,446
Furniture and fixtures		140,576		129,476
Leasehold improvements		744,297		744,297
Construction in progress		183,100		52,097
		9,853,061		9,603,316
Less accumulated depreciation and amortization		(7,570,941)		(7,359,310)
Property and equipment, net		2,282,120		2,244,006

Other Assets
Investments, net - marketable securities, long term		1,499,000		994,478
Right of use asset, net		542,087		592,170
Other assets		75,822		78,289
Total other assets		2,116,909		1,664,937

TOTAL ASSETS	$	14,936,998	$	17,486,420


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Revenue	$	5,532,710	$	7,457,690	$	13,935,805	$	13,254,837

Cost of revenue		4,153,771		6,204,080		11,141,750		10,676,630

Gross profit		1,378,939		1,253,610		2,794,055		2,578,207

General and administrative expense		467,573		419,083		949,834		851,496

Research and development expense		174,630		115,493		359,865		250,853

Marketing and sales expense		151,538		127,243		280,890		236,814

Income from operations		585,198		591,791		1,203,466		1,239,044

Interest income, net		96,461		63,914		183,517		112,891

Income before provision for income taxes		681,659		655,705		1,386,983		1,351,935

Income tax expense		155,153		144,346		315,153		302,556

NET INCOME	$	526,506	$	511,359	$	1,071,830	$	1,049,379

Earnings per share - basic and diluted (Note 7)

Income per common share
Basic	$	0.12	$	0.11	$	0.24	$	0.23
Diluted	$	0.12	$	0.11	$	0.23	$	0.23

Weighted average shares outstanding
Basic		4,539,549		4,530,207		4,537,175		4,527,669
Diluted		4,569,288		4,560,315		4,566,831		4,557,863


			Additional
	Common		Paid-In		Accumulated
	Stock		Capital		Deficit		Total
Balance 12/31/2023	$	10,662,343	$	2,233,384	$	(1,915,694)	$	10,980,033

Common stock issued (Note 5)		43,980		—		—		43,980

Net income		—		—		545,324		545,324

Balance 3/31/2024	$	10,706,323	$	2,233,384	$	(1,370,370)	$	11,569,337

Net income		—		—		526,506		526,506

Balance 6/30/2024	$	10,706,323	$	2,233,384	$	(843,864)	$	12,095,843

Balance 12/31/2022	$	10,618,435	$	2,231,807	$	(4,104,593)	$	8,745,649

Adoption of ASU 2016-13 (Note 3)		—		—		(5,000)		(5,000)

Stock based compensation expense (Note 5)		—		1,182		—		1,182

Common stock issued (Note 5)		43,908		—		—		43,908

Net income		—		—		538,020		538,020

Balance 3/31/2023	$	10,662,343	$	2,232,989	$	(3,571,573)	$	9,323,759

Stock based compensation expense (Note 5)		—		395		—		395

Net income		—		—		511,359		511,359

Balance 6/30/2023	$	10,662,343	$	2,233,384	$	(3,060,214)	$	9,835,513


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Losses		Gains		Fair Value
June 30, 2024
Corporate bonds	$	1,500,000	$	(10,640)	$	—	$	1,489,360
U.S. government treasuries		509,478		(231)		—		509,247
Total investments	$	2,009,478	$	(10,871)	$	—	$	1,998,607

Allowance for credit losses		(1,000)
Total investments, net	$	2,008,478

December 31, 2023
Corporate bonds	$	1,500,000	$	(9,078)	$	—	$	1,490,922
U.S. government treasuries		509,478		(1,786)		—		507,692
Total investments	$	2,009,478	$	(10,864)	$	—	$	1,998,614

Allowance for credit losses		(15,000)
Total investments, net	$	1,994,478


		Weighted
		Average
	Stock	Exercise
	Options	Price
Outstanding at January 1, 2023	41,304	$	1.05
Outstanding at December 31, 2023	41,304	$	1.05
Exercised	(4,401)		1.25
Outstanding at June 30, 2024	36,903	$	1.03
Options exercisable at December 31, 2023	41,304	$	1.05
Options exercisable at June 30, 2024	36,903	$	1.03



2024	$	58,416
2025		116,829
2026		116,829
2027		116,829
2028 and beyond		223,923
Total minimum lease payments		632,826
Less debt discount		85,692
Total operating lease obligations	$	547,134


	2024			2023
Operating cash outflows from operating leases - year-to-date	$	56,139		$	51,969
Weighted average remaining lease term – operating leases		5.4	years		1.4	years
Weighted average discount rate – operating leases		5.5	%		5.5	%


Total minimum lease payments - 2024	$	8,086
Less amount representing interest		32
Present value of minimum lease payments		8,054
Less current portion		8,054
Finance lease obligations, net of current portion	$	—

Remaining lease term – finance lease		0.2	years
Discount rate – finance lease		4.23	%


3(a)		Certificate of Second Amended and Restated Articles of Incorporation of Superconductive Components, Inc. (Incorporated by reference to Exhibit 3(a) to the Company’s initial Form 10-SB, filed on September 28, 2000)

3(b)		Restated Code of Regulations of Superconductive Components, Inc. (Incorporated by reference to Exhibit 3(b) to the Company’s initial Form 10-SB, filed on September 28, 2000)

3(c)		Amendment to Articles of Incorporation recording the change of the corporate name to SCI Engineered Materials, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB filed November 7, 2007).

4(a)		SCI Engineered Materials, Inc. 2011 Stock Incentive Plan (Incorporated by reference to the Company’s Definitive Proxy Statement for the 2011 Annual Meeting of Shareholders held on June 10, 2011, filed April 28, 2011).

4(b)		Superconductive Components, Inc. 2006 Stock Incentive Plan (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for the 2006 Annual Meeting of Shareholders held on June 9, 2006, filed May 1, 2006).


14(a)		SCI Engineered Materials Code of Ethics for the Chief Executive Officer and Chief Financial Officer (Incorporated by reference to the Company’s Current Report via the Company’s website at www.sciengineeredmaterials.com).

31.1	*	Rule 13a-14(a) Certification of Principal Executive Officer.

31.2	*	Rule 13a-14(a) Certification of Principal Financial Officer.

32.1	*	Section 1350 Certification of Principal Executive Officer.

32.2	*	Section 1350 Certification of Principal Financial Officer.

99.1	*	Press Release dated August 2, 2024 entitled “SCI Engineered Materials, Inc., Reports 2024 Second Quarter and Year-to-Date Results.”

101	*	The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Balance Sheets at June 30, 2024 and December 31, 2023, (ii) Statements of Income for the three and six months ended June 2024 and 2023, (iii) Statement of Changes in Equity for the three and six months ended June 30, 2024 and 2023, (iv) Statements of Cash Flows for the six months ended June 30, 2024 and 2023, and (v) Notes to Financial Statements.

104	*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


		SCI ENGINEERED MATERIALS, INC.

Date: August 2, 2024		/s/ Jeremiah R. Young
		Jeremiah R. Young, President, and Chief Executive Officer
		(Principal Executive Officer)

		/s/ Gerald S. Blaskie
		Gerald S. Blaskie, Vice President, and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)


Date: August 2, 2024	/s/ Jeremiah R. Young
	Jeremiah R. Young
	President and Chief Executive Officer
	(Principal Executive Officer)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,071,830	$	1,049,379
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and accretion		253,262		227,799
Amortization of patents		2,466		2,207
Stock based compensation		43,980		45,485
Gain on disposal of equipment		—		(9,142)
Deferred taxes		16,339		224,992
Inventory reserve		1,020		2,472
Changes in operating assets and liabilities:
Accounts receivable		(331,179)		(195,085)
Inventories		2,197,209		477,980
Prepaid purchase orders		1,118,572		(37,362)
Prepaid expenses		81,845		26,044
Other assets		(14,000)		579
Accounts payable		443,374		18,166
Operating lease assets and liabilities, net		(6,056)		(5,019)
Customer deposits		(3,921,817)		(358,729)
Accrued liabilities		(109,342)		(40,933)
Net cash provided by operating activities		847,503		1,428,833

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment		—		16,000
Purchases of marketable securities		(1,000,000)		(509,478)
Proceeds from maturities of marketable securities		1,000,000		489,265
Purchases of property and equipment		(287,926)		(214,522)
Net cash used in investing activities		(287,926)		(218,735)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on finance lease obligations		(41,095)		(49,951)
Net cash used in financing activities		(41,095)		(49,951)

NET INCREASE IN CASH	$	518,482	$	1,160,147

CASH - Beginning of year		5,673,994		3,947,966


	June 30,		December 31,
	2024		2023
Raw materials	$	1,651,737	$	3,222,642
Work-in-process		624,421		1,240,067
Finished goods		188,543		199,201
		2,464,701		4,661,910
Inventory reserve		(8,532)		(7,512)
	$	2,456,169	$	4,654,398


Date: August 2, 2024	/s/ Gerald S. Blaskie
	Gerald S. Blaskie
	Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting
	Officer)


	/s/ Jeremiah R. Young
	Jeremiah R. Young
	President and Chief Executive Officer of
	SCI Engineered Materials, Inc.
	(Principal Executive Officer)
	August 2, 2024


	2024		2023
CASH (USED IN) PROVIDED BY:
Operating activities	$	847,503		1,428,833
Investing activities		(287,926)		(218,735)
Financing activities		(41,095)		(49,951)
NET INCREASE IN CASH		518,482		1,160,147

CASH - Beginning of period		5,673,994		3,947,966

CASH - End of period	$	6,192,476	$	5,108,113